DH concerned about taxes...what to do...

[iRent2u]

Concern about taxes

If you are making money taxes are inevitable. There is no good time to pay taxes. However, the longer you postpone usually the tax rate goes up and if you are paying attention to our President, that is his plan. I have never made a big deal about tax shelters. If and when you take the money you will pay taxes. You are just delaying the inevitable.

 

[CindyBlue]

Good luck Cindy, aren't these boards awesome? Sounds like you had your lightbulb moment and that your are in good hands with a fiduciary advisor.

I totally agree - these boards are awesome!!! I am so appreciative of the people here who are wiling to so generously give their advice and share their experiences. I just don't know what I'd do without you all!

I'm sure I'll have more questions once we've actually talked to the financial advisor and the tax people

 

[imnontrad]

Consider sitting down with a fee-only Certified Financial Planer who specializes in retirement to draw up a multi-year plan. Also draw up a contingency plan when one spouse dies. The CFP may be able to show that paying more in taxes now may save even more taxes later, especially if the surviving spouse is paying taxes at th ehigher single rate.

 

[rai-zero]

Basically you’re going to pay taxes one way or another. If you take out a lump sum as you suggested in first post you’ll pay taxes on all of that all at once jumping you into higher and higher tax. brackets. The government gives us lower tax brackets that you can fill up the zero and low tax brackets first and they renew every year so you get to fill up the free and low tax brackets each new year. Taking all out at once will force you into very high tax brackets and and all the future low tax brackets might go to waste. It’s better to pay 15-20% on a small distribution every year than to pay 25-30% all at once on a huge distribution. If you are now at a max 24% tax bracket and talking out all puts you into a 32% bracket that’s an extra 8% tax you would pay that is like a free gift to the IRS.

Plus money in a tax shelter is advantageous because it’s growth and interest and dividends are not taxed as you go. Once you take it out of a tax shelter you get taxes every year on interest and capital gains. Also money in a tax shelter is protected from certain kinds of judgments.

https://www.investopedia.com/ask/answers/07/seizing-savings.asp


Plainly speaking if you were to cash out and pay all taxes in this year it’d be the worst possible option. You will still pay taxes on the withdrawal and probably be forced into higher and higher tax brackets.

Best if you weren’t taking SS at all until 70. You already said you don’t need the extra money so you are just paying more taxes on something that you don’t need and if you wait you’re going to get bigger checks.

 

[CindyBlue]

Consider sitting down with a fee-only Certified Financial Planer who specializes in retirement to draw up a multi-year plan. Also draw up a contingency plan when one spouse dies. The CFP may be able to show that paying more in taxes now may save even more taxes later, especially if the surviving spouse is paying taxes at th ehigher single rate.

This is great - I am copying this down into my “Questions for the financial planner” list!”
Thank you!

 

[DCdave]

If you are making money taxes are inevitable. There is no good time to pay taxes. However, the longer you postpone usually the tax rate goes up and if you are paying attention to our President, that is his plan. I have never made a big deal about tax shelters. If and when you take the money you will pay taxes. You are just delaying the inevitable.

Projecting future tax rates is difficult/nearly impossible. Rather than “usually going up” the tax rate trend has been actually going down over the past 4 decades. Biden’s capital gains/dividends proposals, if (doubtful) passed, will hit those with incomes above 1,000,000 which statistically won’t impact many posters.

 

[ivinsfan]

This is great - I am copying this down into my “Questions for the financial planner” list!”
Thank you!

This is pretty much what everyone here has been telling you from post number one...